SmartMetric Sues Over Smart Card System Patent… Again

SmartMetric used its “smart card” system patent to sue the three biggest credit card companies in the U.S. and lost — but the company isn’t giving up yet.

It sued American Express, MasterCard and Visa in two separate 2010 lawsuits and is now appealing both cases, and in an unusually aggressive move, it filed an additional, new suit on August 29 against MasterCard and Visa that is nearly identical to its previous suits.

Products like MasterCard’s PayPass, Visa’s payWave and American Express’s ExpressPay smart card systems use microchips to store user information that is deciphered by card readers to complete transactions — something SmartMetric claims infringes upon its patent.

This new lawsuit against MasterCard and Visa concerns both “contact” and “contactless” smart cards (the former are inserted into a card reader, the latter only need to be placed in proximity to a reader), while SmartMetric’s first lawsuit against the credit companies only referred to contactless card systems.

SmartMetric is “biometric card” company, founded in 2002 to develop cards that would store a user’s fingerprint for identification, for use by government agencies or corporations. The company has yet to make any money, according to its annual report to the SEC.

It recently started a spin-off called SmartDatatel, a digital advertising company, which bought the rights to the patent involved in this litigation.

SmartMetric CEO Chaya Coleena Hendrick had no comment on the pending litigation. The company’s lawyer, Patrick Bright of Wagner Anderson and Bright LLP, wouldn’t say much about the lawsuit, except, “I think in general, if someone holds a patent, they have a right to enforce it, to get paid.”

SmartMetric’s patent was issued in 2004, but smart card systems aren’t new. A 1987 article in The American Banker said the microchip embedded cards were already being tested by banks in the UK to conduct purchases, especially while traveling. Since the mid-1990s, smart card systems have been popping up around the globe and are now common across major transit systems, such as in Hong Kong, London, Los Angeles and the San Francisco Bay Area.